BitConnect Closes Exchange as States Warn of Unregulated Sales

What has happened today is Bitconnect has closed the exchange on their website, and so users flocked to some of the only other exchanges (of dubious reputation, since no reputable exchange wanted to list the BitConnect coin) in order to sell their now-worthless tokens, resulting in losses of around 90% today: https://coinmarketcap.com/currencies/bitconnect/

Many famous Youtubers and other individuals with influence convinced hundreds of people to put their money into BitConnect in order to profit off of referrals, leading to a lot of unfortunate losses and a lot of delusion and misinformation among devoted investors. The general sentiment towards those that lost money due to BitConnect has been a mocking attitude in the cryptocurrency investment communities, as BitConnect has been referred to by many as a blatant ponzi scheme for months.

If you lost money in this scheme and are in the United States or Canada, contact your state securities regulator [1]. Mention any such referral sources. Those individuals may be liable for securities fraud under state and federal law.

If you're in the United States, send a copy to the SEC [2]. If you lost more than a token amount, I would also recommend contacting an attorney.

[1] http://www.nasaa.org/about-us/contact-us/contact-your-regula...

[2] https://www.sec.gov/complaint/select.shtml

Disclaimer: I am not a lawyer. This is not legal advice.

Jesus, this is pretty blatant.

Yeah, HitBTC has the most volume, and it has a terrible reputation. See all the reports of "maintenance issues" when a coin traded there can be sold at a higher price on another exchange.

Funny thing, I noticed because it is using an old version of our 3D player on their home page (the 3D robot), and they are getting an incredible amount of traffic.

Make them discover these actions have consequences, I can only see good sides to this.

Ponzi schemes are illegal [1]. Receiving transaction-based compensation to promote a Ponzi scheme is the likely securities fraud.

[1] http://www.acfe.com/ponzi-schemes.aspx

Disclaimer: I am not a lawyer. This is not legal advice.

That is unlikely to pay out to someone who bought after BitConnect was shut down.

Generally speaking, when a regulator resoles a Ponzi scheme they take the promoter's assets and help put it into trust. That trust has two jobs. One, to sue those who sold their BCC before the scheme unraveled [1]. And two, to distribute cash to those who lost money.

[1] http://www.newsweek.com/it-fair-sue-madoff-victims-who-made-...

Just wanted to make that distinction. Not commenting on BitConnect directly.

Which I think is a potential lesson for HN readers: something can be funny, but still be fraud.

Ponzi schemes are one of those things you can't disclose your way out of.

Sort of like HIPAA [1]. If you violate HIPAA, "we disclosed our non-compliance to the patient" is an inadequate--and borderline aggravating--excuse.

[1] https://en.wikipedia.org/wiki/Health_Insurance_Portability_a...

Disclaimer: I am not a lawyer. This is not legal advice.

"A fool and his money are lucky enough to get together in the first place." - Gordon Gekko

Lots of crypto-coin stuff, including virtually all "name brand" crypto's, do the same thing. Most of the marketing is full of complete political, financial, and computer science nonsense. Anybody educated in any of those topics takes one look at the crypto space and goes "nope. sounds too good to be true. pass". What's left is a much more, shall we say, naïve set of marks to go after. You know, the kind that won't likely sue the shit out of those at the top of the pyramid... or even report them to the authorities. A very nice feature of Bitcoin is it specifically targets those with an anti-authoritarian bent--the kind who blather on about tax-theft, how the police should be deregulated, free market private industries and how the system of law should be replaced with cold, hard, unfeeling computer programs. If you were a scammer, wouldn't you want to target a group of people who wouldn't in a million years report you to the police?

Good stuff. The "crypto space" is an amazing thing to watch. Never a dull moment.

:)

You can be intelligent, but old and suffering from MCI, or a more advanced dementia. You could be mentally ill, or brilliant in one field, but utterly ignorant of finances, or human nature. You could be a genius with TBI, or you could b young and foolish.

I can’t see what you’re saying as anything other than venting of spleen. Maybe it makes you feel better as a mechanism to cope with frustration, but I’d encourage you to reconsider that attitude toward your fellow humans.

Not really a fraud though, they WILL send you a bottle of mints as described

Useless pedantry. A scam is a scam no matter what you call it. Getting caught up deep in terminology is a great way to for shysters to obfuscate any wrongdoing. These "business structures" are all part of the broader category called "things that are a scam".

If they said, deposit your money and we'll pay you back only if enough people after you also deposit their money then you'd have an interesting point, although I'm sure it's still illegal even if you announce your intentions before doing something illegal.

[1] https://en.wikipedia.org/wiki/Tall_poppy_syndrome

[2] https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

Lotteries work the same way and are legal.

However, I am not a lawyer and this is not legal advice

I have noticed that if you look at reviews for different exchanges, most will have a large amount of negative reviews. Some deserve it but I suspect that a lot of the reviews are not real - competing exchanges may have paid someone to write fake negative reviews.

Not saying HitBTC is the best or anything.

As an exercise, try this: Take the name of your absolute favorite exchange, combine it with the word "review" (sans quotation marks) and do a Google search for that. Look through the results.

Maybe a different youtuber criticized one of those famous recommenders, and included relevant clips of the recommendation in their video?

Remember a few years ago the service ponzi.io, a openly transparent Bitcoin ponzi scheme. Here's the discussion from back then: https://news.ycombinator.com/item?id=7202182

Can't argue with their claims either, the mints really do combat all the symptoms caused by government released chemtrails.

I am a lawyer, this is legal advice and you are now my client

I guess someone that has studied law more or is an actual lawyer can weigh in on this in an unofficial capacity (because we are not paying them for advice!).

/sarcasm

> If you were a scammer, wouldn't you want to target a group of people who wouldn't in a million years report you to the police?

Most of the fresh faces that make the bubbles happen don't care about any of that stuff, they are just blinded by greed and will get burned for it. The ancap/libertarian ideologues who have been involved for years are the ones who are worth ridiculous amounts of money these days.

The fact that it's a relatively large community of fresh millionaires/billionaires (they won't tell you, but that's a huge percent of people involved in crypto for 5+ years) with an unwillingness to convert to fiat currencies (revoking citizenships to avoid taxes, even) does mean that there's a willingness to put money in marginal opportunities.

[1] https://twitter.com/Bitfinexed

[2] https://twitter.com/Bitfinexed/status/953510174244986880

However, I am not a native English speaker and this is not a grammatical advice

And/Or contact the Financial Conduct Authourity.

Pyramid and Ponzi schemes are illegal here too AFAICT.

"You may be right on all points, but it's still my decision to make, you can't do anything about it."

Disclaimer: I am not a native English speaker and this is not grammatical advice

https://bitconnect.com/images/referal_bonus.png

[1] - https://ipfs.io/

That is not always the case. Sometimes you have a Ponzi like Madoff where it may seem legit to investors but most ponzis are blatant and the people involved know it is a ponzi but think they can profit by selling it to greater fools.

Of course they will all express shock and feign ignorance when they are trying to get their money back or defend themselves from the angry people they hustled.

At any given time, there is someone who is saying that it’s all about to fall apart. There might even be someone who gets the timing and the reasons right.

The hard part is doing so consistently, and there’s little evidence that anyone can do this, which indicates that luck is the primary factor in various famous “crystal ball” economic predictions.

Maybe, maybe not. Without a track record of doing it a whole bunch of times, it's far more likely they made a lucky guess, stumbled into information, etc.

Some are even right but don't get the timing correct. For example, this guy wound up losing everything and owing $106k on a margin call... but if you look at the stock value today he was absolutely correct in shorting it. https://www.marketwatch.com/story/help-my-short-position-got...

Ive rarely seen that sort of disclaimer about any other occupation

http://hirealawyer.findlaw.com/do-you-need-a-lawyer/what-is-...

No, because there are people that predict fiscal doom all the time.

* People predicted that 2016 would have a huge crash.

* People predicted that 2017 would have a huge crash.

* People predicted that 2018 would have a huge crash.

* People will predict that 2019 would have a huge crash.

* People will predict that 2020 would have a huge crash.

If there's a huge crash in 2019, are you sure the people that predicted the 2019 crash are geniuses? Perhaps some of them were simply lucky. You have to be super careful if you are going to go by a small sample of past predictions, because there are a lot of people that make a lot of predictions. Statistically, some of them will make predictions that are correct by random chance.

I didn't know that. Does that mean that raffles are technically illegal? Or is there some kind of special-case about winning money?

EDIT: I don't have Twitter, if someone wouldn't mind, could they connect @Bitfinexed to @textfiles?

Those Youtube videos exist, if not with a "is_deleted" flag, in Youtube backups. Some are already in the Internet Archive.

So I guess the "I am not a lawyer" is sort of a corruption of that, a magic spell invoked by not-lawyers to save themselves from not-problems.

Of course that opinion is worth the paper it's printed on.

I am not a lawyer.

The world is not black and white.

Only up until very recently did Crypto as a whole break away from it, and BitConnect just happens to have its foot in both.

To allow a raffle, dodges often enshrined in law include:

* Very low prize limits (e.g. max $100) but donated prizes don't count towards that limit. So your local charitable raffle has no problem getting a nice bottle of Scotch, dinner for two with wine at a nice place, family portrait, whatever local merchants want to donate, and it's all fine, so long as they don't buy it.

* Exemptions if you can only buy tickets in one place, or if you only sell them to members of your organisation that exists for some other purpose (e.g. a local church, employees at a factory)

* Exemptions if the profits of the gambling go to a recognised charitable organisation.

* Exemptions if there's no profit at all, all is spent on prizes that go to ticket buyers randomly, so the whole operation only moves money around randomly inside a group of participants.

One of the Youtubers, Cryptonick said clearly on his Youtube account that he was 17 years old.

https://www.reddit.com/r/CryptoCurrency/comments/7r0ftz/cryp...

Disclaimer: I am not a native English speaker, and this is advice about grammar.

That said, it is possible to use market indicators, historical factors, and other numeric qualifications for reasons to be wary, because the investment asset looks too expensive. For instance, up to the 2008 crash, two important indicators -- the price to income ratio, and the price to rent ratio, were very high, indicating real estate was significantly overvalued. The same thing applied to the sky high prices of many .com stocks in 2000, who really didn't have any profit or even cash flow behind it to back the valuation up.

There were plenty of experts raising warning flags on these bubbles. Even from a broader perspective, The Economist was wary of Internet stocks in 1999 (https://www.economist.com/node/183809) and was wary of the housing bubble that caused the 2008 crash in 2005 (http://www.economist.com/node/4079027).

(Of course, The Economist in 1999 used Amazon as the example of an overvalued stock. Whoops. Shows that you "never know". But they wouldn't have been wrong if they had used, say, pets.com.)

Saying cryptocurrency only recently broke away from this is just a conclusion of your premise, which I disagree with entirely due to the existence of material like Bitcoin's whitepaper. To say they are on the same spectrum is just misleading.

Do you know that as a fact? I'm not trying to defend bitconnect, I just think it's dangerous living in a world where people state things as facts that have not been proven.

People often cite the high rate of return from their trading bot as "proof" that they're a ponzi, but I don't buy that because run my own bitcoin trading bot and the returns are more than triple bitconnect's average.

People much smarter than I who are running the same trading bot get even higher returns than I do. I think bitconnect's return rate was low because they were skimming the returns, which explains why they would take other people's money even though their bot works... because they can make even more by providing it as a service.

They don't.

This was:

a) Deliberately published (ie. not leaked)

b) By the uploader who is also the content creator (not e.g. doxing or copyright infringement)

c) Without breaching their own privacy (not e.g. posting a nude of themselves)

d) In this case possibly if not likely unlawful (hence warranting a police investigation)

e) For-profit (non-profit crimes have less priority)

Furthermore:

> Deleted user data has to be really gone, even from backups, within a finite time.

Sure, but we're talking -at this point- one or two days max here and we're talking about a scam.

While public comment for which no one has been charged money may be outside of the bounds of what would be covered by most such laws, some people view it as best to be clear (and, in any case, such a disclaimer served as meta-legal advice that the matter at hand is one on which you should consult a lawyer if you have critical concerns.)

And, there are other concerned for lawyers in communications that might be mistaken for providing legal advice.

All that combined to justify disclaimers that include some or all of, as applicable:

I am not a lawyer.

I am not your lawyer.

This is not legal advice.

(Incidentally, I am not a lawyer, I am not your lawyer, and none of this is legal advice.)

But, don't take my word for... if you look at bitcoin trading bots that you can run yourself (many example on youtube of people running their own), bitconnect's return rate was significantly lower than typical bitcoin trading bots.

So, if bitconnect was getting typical returns (and it's safe to say they should be getting at least 2%, which only puts them in the top ~60% of bitcoin bot operators), they could have been taking more than 1% for themselves and still returning their "high" level of returns -- without running any sort of ponzi scheme!

Seeing my own bitcoin trading bot in action led me down the path of investigating stock trading bots and high speed trading within banks. The more I learned, the more I realized the real ponzi schemes are the national banks. That sounds crazy until you realize that with fractional reserve banking, they can take (for example) $1000 that you deposit and lend out 90% of it -- they only have to keep 10% of deposits deposits in reserve! Yet, most of them pay you less than 1%/year in interest. If I can make 4%/day on $1000 in my basement, how much do you think giant banks can make with your $1000?

I would highly recommend running your own bitcoin trading bot if you've got $1000 to spare. I'll refrain from recommending a specific one for fear of sounding biased, but it will completely change your outlook on what bitconnect could be. More importantly, it'll probably make you a decent chunk of change that you can cash in at anytime (unlike bitconnect's CD model).

As another user says, the only legal Lottery is the one that is run by the State.

Isn't it interesting.

What does it mean to be a _known_ ponzi scheme? How many people outside of the core conspirators are required for it to be reclassified from _suspected_ to _known_?

> it was quite literally just a bare-bones ponzi scheme, where you deposit your money (Bitcoin) on their website, buy their token, 'lock' your funds for some amount of time, and you are promised very high interest rates while encouraged to re-invest your returns.

> What has happened today is Bitconnect has closed the exchange on their website, and so users flocked to some of the only other exchanges (of dubious reputation, since no reputable exchange wanted to list the BitConnect coin) in order to sell their now-worthless tokens, resulting in losses of around 90% today:

https://coinmarketcap.com/currencies/bitconnect/

https://news.ycombinator.com/newsguidelines.html

https://news.ycombinator.com/newsguidelines.html

However, smart contracts and the adoption of the blockchain by technology's bigger players has provided some validation to what's happening. Regardless of the white papers, and how one individually assessed the thesis, it didn't have market adoption and it wasn't as if BTC was actually producing something. So investing in BTC (a virtual commodity in limited value) had no real business purpose.

So crypto was in the same boat as ponzi schemes, until very recently. Now it's being taken seriously due to providing actual value.

The only thing BTC is really good for right now is to act as an intermediary between it and alts--since you can buy BTC and ETH with fiat, then transfer those to alts. BTC isn't a valid currency for transactions for a variety of reasons. It is simply the backbone of the crypto economy at this point, and the grandfather of the technology--so there's some lure to it as a limited asset that, so long as someone wants it, someone can sell.

Bitconnect claimed to be running a trading bot but everyone said they were just running a ponzi scheme because the returns were about 1%/day... even though they refunded everyone's coins when they stopped the lending bot program. I've never heard of a ponzi scheme that can return everyone's money when it closes up.

Not to mention, I think it's completely possible they were actually running a real trading bot because you can run your own trading bot and earn more than 1%/day very easily. People here really don't like to hear facts because it's easier to go with your gut feeling about some paradigm you've never heard of than doing the research, so they downvote any comment that says bitconnect was anything other than a ponzi scheme (or they'll call it a pyramid scheme if they really want to prove they don't know what they're talking about).

The trading bot uses BTC, ETH or USDT as a base currency and then buys alt coins with the base currency then sells them back to the base currency of your choice using an exchange. If it's configured right, it will make dozens of trades a day for small profits, which add up through the day (and night).

I personally run the bot called "Profit Trailer" and use it with the exchange "Binance". I use Binance because you can buy their coin and get lower fee trading by using their coin to pay for the fees.